Reader Mailbag: Sunburn

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Helping a troubled friend
2. Dating and budgets
3. Investments for high income couple
4. New games: short, fun, cheap
5. Career coaching and mentoring
6. Potluck with mixed diets
7. Figuring out pile of debts
8. Haircuts at home
9. Vanguard minimum investment concern
10. Free-to-play computer games

When you’re going to be spending an uncertain amount of time outside on a very sunny day, plan for the longest time you might be out there in terms of sunscreen, not the shortest.

Trust me.


Please pass more aloe.

Q1: Helping a troubled friend
I have a friend since childhood whose life has gone in a very different direction from mine. It’s definitely put distance between us but I still care deeply for her and value our years of friendship. She is now a single mom to a 1 year old, living with a family member in exchange for babysitting their child. She is on welfare and has no assets or employment. She has no car and is therefore largely housebound with two young kids and few (if any) friends in her area. Her family are wonderful and help as much as they can, but they’re mostly several states away.

I’m single with no kids, working and financially stable (but with student debt, no car and a shared apartment).

I’ve held back on buying typical baby gifts and have put some money aside to do something for her, but I am kind of at a loss as to what. My mom advised me to just spend time with her and give her a break, so I’m going for a long weekend next month. I recognize that’s valuable to a single parent, but I’m wondering if there’s more I could do for her daughter. Maybe set up a 529?
– Ellen

The time spent with her and any time you spend watching her child so she can get a break is simply gold for any parent, let alone a single parent of a one year old.

You need to be very careful about financial help. Some people have substantial pride and can view financial assistance in situations like this as unwarranted and even somewhat offensive.

A 529 is definitely a good idea, but broach the idea very carefully. You may find that she absolutely does not want help like this.

Q2: Dating and budgets
I am 24 and single. I recently moved to a new city and have been dating a bit. I am wondering how I should budget for dating in order to keep my expenses in line. Should I just figure out a monthly dating cap and use that in my budget?

– Terry

That is exactly what I would do in your shoes. Simply treat dating and romance as another line in your budget.

If you find that you’re pushing against that boundary you’ve set a lot, you should view it as an opportunity to reassess your romantic life. Is the money and time you’re spending here giving you the value you want?

If it’s not, your budget can actually be a great tool to give you a hint that new romantic approaches may be needed.

Q3: Investments for high income couple
After years of graduate school my wife and I finally have entered the real world where we’ve been very lucky to get high paying jobs in an expensive part of the country. While we managed to open and fund Roth IRAs while we were in graduate school, the amount in them is rather small. Within my job we’ve been maximizing my contribution to a Roth 401(k) (full $17500 employer match). My wife has a 401(a) through her employer with an automatic defined contribution of 5% of her gross income matched by 8% of her gross from her employer. Our current salaries push us just out of the range for Roth IRA contributions ($188000 max income for a married couple) and past the income deductibility limits for the traditional IRA ($110000 max income when both spouses have retirement plans).

Given that we’ve maxed out our employer sponsored plans and it looks like our income is too great for a Roth IRA and we can’t deduct contributions to a traditional IRA, are we out of options for tax advantaged retirement plans? Does it make sense to continue to contribute to a traditional IRA (over, for example, opening up a brokerage account) even if we can’t deduct the contribution and will be taxed on both ends of the transaction (e.g. putting money in now and taking money out at retirement)?
– Claude

The only real advantage of a Traditional IRA in the situation you describe is that once money is inside the account, you can shift investments or invest in tax-inefficient things without any direct implications on your taxes. You only pay taxes when the money comes out.

Now, if you’re a conservative investor who mostly buys and holds very stable things, this isn’t an issue, but if you buy things like REITs, this can be a huge factor.

If this is a non-issue to you, I’d check with a financial advisor first, but I think an ordinary brokerage account is completely reasonable here.

Q4: New games: short, fun, cheap
What are some good low-cost games to pick up that lots of people would enjoy? We’ve started to have lots of fun playing cards and board games every week or two with a potluck dinner and we want to keep it fresh.

– Andrew

Hanabi is a great simple cooperative card game for two to five players. The twist with Hanabi is that you can’t actually see the cards in your own hand – you have to rely on specific clues from other players to figure out what cards you have and you’re trying to play cards in the right order in accordance with those other players. It’s great fun.

The Resistance is a wonderful “traitor” game for five to ten players. At the start of the game, each player gets a secret “good guy” or “bad guy” card, then through the gameplay, the players have to collectively figure out who the good guys are. It’s a great social game with tons of replay value.

Love Letter is a really fun and quick simple deduction and bluffing game for two to four players. You start with a card and each turn, you draw a card and then play one of the two you have. Clever play and reading of others will eliminate other players, but that’s fine because a round only takes a minute or so. The game is played over a bunch of rounds, with players scoring a single point if they survive to the end of a round.

All of these games are great. All of these games are cheap. All of these games come in pretty small boxes.

Q5: Career coaching and mentoring
What is your take on paying for coaching or mentoring? Also what options would you suggest if you are on a limited budget?

– Louis

Some people thrive under the tutelage of a coach of some kind. The question of whether this type of service is for you has a lot to do with your personality and your past. Have you previously found value when using coaches? Have coaches pushed you to great things? Or have you had more success with your own path?

An aside: I had some offers to get into finance coaching, but I just don’t feel that it is the right thing for me. I worry about being able to turn on the motivation and energy when others come calling.

If you don’t have much of a budget, the best option is to find people who are striving for the same goal you are (but in a way that doesn’t directly compete with you) and become a coach for each other. A thorough examination of your personal and professional calendar will likely find you some great candidates.

Q6: Potluck with mixed diets
I’ve been trying to organize a potluck but my challenge is food allergies and mixed diets. Some people are vegetarians, some are pescatarians (they are vegetarians who also eat fish), some are allergic to nuts, and one is lactose intolerant. Any advice on making this kind of thing work? We’d all save money with a few good ideas.

– Erin

Have everyone bring a side dish that matches not only their own diet, but one of the other diet restrictions in the group. So, you could tell the pescatarian that they must bring a dish that they can eat and that a vegetarian or a nut-allergic person could eat. You can get as specific with this as you want.

When everyone arrives, make sure everything is clearly labeled with regard to food allergies so that everyone knows what’s okay to eat.

We have a few conflicting diets and allergies in our own group of friends and we’ve managed to work through it by simply being clear. At this point, everyone knows each other’s dietary restrictions.

Q7: Figuring out pile of debts
I’d like to aggressively pay down my student loans (deferred until 2016) and I am thoroughly perplexed. I have very low living expenses, a fully funded emergency fund and a healthy PhD stipend. I also have a part time job that covers 80% of my living expenses. I have roughly $40,000 in student loans at the moment and estimate I can pay off about $8,000 a year over the next three years.

A Unsubsidised $11,000 7.9%
B Subsidised $9,000 6.8%
C Unsubsidised $12,000 6.8%
D Subsidised $10,000 4.5%

I assume I want to pay off the highest rate of interest on the unsubsidised loan and then move to the next unsubsidised loan but is there any virtue to paying down the principal on the two subsidised? I’ll be starting an academic career abroad (which complicates monthly payments) and want to reduce my debt as much as possible before that point.
– Bill

Unless I had all of the unsubsidized debts paid off, I’d let the others sit.

If I were you, I’d focus entirely on Loan A right now. Don’t even worry about Loan C. Get rid of Loan A entirely, then move on to Loan C.

Since B and D are subsidized, don’t even think about them until C is out of the way. After that, tackle them in interest rate order, but I’d wait until I was out of school to start paying them. If you’re through all of the unsubsidized loans, I’d just save the money until I was out of school.

Q8: Haircuts at home
This seems like a good idea to me but how do you keep it from turning into a mess all over the place?

– Dana

I usually do mine in the yard. If some clippings get into the grass, it makes no difference at all.

Of course, this might not be an option for you. If that’s the case, the best option is to sit a chair in the middle of the largest open space of linoleum or hardwood in your house and cut your hair there. That way, the sweeping is as easy as possible.

A friend of mine has yet another approach that can work for some: he cuts hair in his garage. Since it has a clean floor that’s easy to sweep, this makes it very easy for him to clean up.

Q9: Vanguard minimum investment concern
As it stands, the variety of Vanguard funds still require a minimum initial investment of $3k. I am looking to invest in these funds, in either an IRA or Roth IRA. The maximum annual contribution as I understand it is $5k. If this initial investment in two of Vanguards funds exceeds $5k (i.e. $6k to buy into two of them), then I will have already gone beyond the maximum annual contribution – simply through the process of starting the accounts. How can I simultaneously invest in more than one fund which have $3k minimums, without going over the Fed’s maximum of $5k for IRA’s?

– Roger

I would start with the Vanguard STAR fund, which is kind of their “starter” fund. It’s a very balanced fund that has a minimum balance of $1,000.

I’d start my retirment plan with that. Then, when it’s got a value of $6,000, take all of the money out of that fund and put half into each of the funds you actually want.

I actually used this approach myself. It worked like a charm.

Q10: Free-to-play computer games
A lot of my friends play “free-to-play” online computer games. They keep telling me it’s free but it feels like there has to be a catch…

– Darren

There are a lot of games like this, such as League of Legends and Path of Exile.

They actually are 100% free to play. The catch is that there’s a store sitting there with lots of items available that you’re going to be tempted to buy. With League of Legends, for example, you only have ten characters available to you and those rotate all the time if you just play the free account. To permanently unlock characters, you either have to pay cash or play for a very long time to earn enough “points.”

If the game is good, that model can work really well. The games that are very popular that work on that model usually work because they’re based on a good game.

The question comes down to whether you can avoid that temptation to buy in-game items if you really get into the game. If you’re really enjoying it, saying “no” can be trickier than you might think.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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